TITLE 13. HOUSING

VIRGINIA HOUSING DEVELOPMENT AUTHORITY

Proposed Regulation

Titles of Regulations: 13VAC10-180. Rules and Regulations for Allocation of Low-Income Housing Tax Credits (repealing 13VAC10-180-10 through 13VAC10-180-110).

13VAC10-181. Rules and Regulations for Allocation of Low-Income Housing Tax Credits (adding 13VAC10-181-10 through 13VAC10-181-110).

Statutory Authority: § 36-55.30:3 of the Code of Virginia.

Public Hearing Information:

August 31, 2026 - 10 a.m. - Virginia Housing Development Authority, 601 South Belvidere Street, Richmond, VA 23220.

Public Comment Deadline: August 31, 2026.

Agency Contact: Fred Bryant, Chief Counsel, Virginia Housing Development Authority, 601 South Belvidere Street, Richmond, VA 23220, telephone (804) 343-5837, or email fred.bryant@virginiahousing.com.

Summary:

The proposed amendments repeal Rules and Regulations for Allocation of Low-Income Housing Tax Credits (13VAC10-180) and replace it with a new chapter, Rules and Regulations for Allocation of Low-Income Housing Tax Credits (13VAC10-181), which governs the allocation of low-income housing tax credits. The proposed new chapter streamlines the text, removes outdated and duplicative provisions, and helps facilitate more efficient program administration, reduce development costs, and decrease the time necessary to deliver housing units to the market. Specifically, the revisions (i) add an incentive to provide age-restricted housing; (ii) add a requirement that all applicants make the average income election outlined in § 42(g)(1) of the Internal Revenue Code as the applicable minimum set-aside; (iii) revise incentives for brick and other durable construction materials, developments with census tracts with high poverty, deeper income and rent target commitments, efficient use of resources, and green certification; (iv) reduce the point value for the northern Virginia project-based voucher incentive and revise the incentive to include local project-based assistance; (v) expand the target population referral process; (vi) simplify certain documentation requirements; (vii) remove incentives for veteran-owned small businesses, developments with fewer than 100 units, combination developments seeking both 9.0% and 4.0% credits, new construction in areas with increasing rent-burdened populations, developments located in areas possessing medium or high levels of economic development activity, and the provision of certain amenities; and (viii) eliminate the flat developer's fee cap and developer's fee boost while maintaining the sliding scale to determine the maximum allowable fee.

Chapter 181

Rules and Regulations for Allocation of Low-Income Housing Tax Credits

13VAC10-181-10. Definitions.

The following words and terms when used in this chapter shall have the following meanings unless the context clearly indicates otherwise:

"Applicant" means an applicant for credits under this chapter and also means the owner of the development to whom the credits are allocated.

"Authority" means the Virginia Housing Development Authority.

"Compliance period" has the same meaning as described in § 42(i)(1) of the IRC.

"Credits" means the low-income housing tax credits as described in § 42 of the IRC.

"Credit ceiling" has the same meaning as "state housing credit ceiling" as described in § 42(h)(3)(C) of the IRC.

"Elderly housing" means any development intended to provide housing for older persons pursuant to an exemption to the provisions regarding familial status under the United States Fair Housing Act (42 USC § 3601).

"Extended use agreement" means the extended low-income housing commitment as required by and described in § 42 of the IRC and as drafted and executed by the authority.

"Extended use period" has the same meaning as described in § 42(h)(6)(D) of the IRC.

"Guidance documentation" means the application form, Housing Tax Credit Manual, instructions, and other guidance communications made available to the public by the authority.

"IRC" means the Internal Revenue Code of 1986, as amended, and the rules, regulations, notices, and other official pronouncements promulgated thereunder.

"IRS" means the Internal Revenue Service.

"Low-income housing unit" means those units that are defined as a "low-income unit" under § 42 of the IRC.

"Low-income jurisdiction" means any city or county in the Commonwealth with an area median family income at or below the Virginia nonmetro area median family income established by the U.S. Department of Housing and Urban Development (HUD).

"Qualified nonprofit" means "qualified nonprofit organization" as defined in § 42(h)(5)(C) of the IRC.

"QAP" means qualified allocation plan, consisting of the provisions of this chapter governing the distribution, reservation, and allocation by the authority of federal low-income housing tax credits available under § 42 of the IRC for housing developments located throughout the Commonwealth for occupancy by low-income persons and families, all in accordance with the requirements of the IRC.

"Principal" means any individual or any public or private entity that owns or participates in the ownership of a proposed development or, in the context of an existing or prior multifamily rental project, that has at any time owned or participated in the ownership of such existing or prior project; provided, however, that ownership of less than a 25% interest in an entity directly owned by 25 or more individuals or entities, or a beneficial interest of less than 25% in the assets of a trust, by itself does not make an individual or entity a principal. For the purposes of this definition, "participates in the ownership of" includes, without limitation, serving directly or indirectly in any managerial, governance, fiduciary, or controlling role with respect to such entity or project, or having the power to direct or influence the project's ownership, management, or affairs.

"Qualified application" means a written request for tax credits that is submitted on a form prescribed or approved by the authority together with all documents required by the authority for submission and meets all minimum scoring requirements.

"Qualified low-income buildings" or "qualified low-income development" means the buildings or development that meet the applicable requirements to qualify for an allocation of credits under § 42 of the IRC.

13VAC10-181-20. Purpose and general authority.

The authority is designated as the housing credit agency for the Commonwealth and is responsible for administering and allocating credits in accordance with § 42 of the IRC.

This chapter contains the authority's QAP required by § 42 of the IRC and sets forth the general processing requirements governing the reservation and allocation of credits. In administering the QAP and this chapter, the authority (i) shall adopt supplemental policies, rules, requirements, and guidelines; (ii) may waive or modify any provision of this chapter for good cause to promote the goals and interests of the Commonwealth; and (iii) may take other such actions it deems necessary or appropriate, consistent with § 42 of the IRC. The authority may charge and collect fees in amounts and at times it determines necessary to administer the provisions of this chapter, subject to the requirements of the IRC.

No determination made by the authority in connection with the reservation or allocation of credits shall be construed as a representation or warranty of the feasibility or viability of any project.

The authority can be an applicant, and the authority may consider and approve, in accordance with this chapter, both the reservation and the allocation of credits to buildings or developments that the authority may own or may intend to acquire, construct, or rehabilitate.

13VAC10-181-30. Locality notification information (LNI).

A. As a prerequisite to application and by the applicable deadline established by the authority, each applicant must initiate the locality notification process by submitting, on a form prescribed by the authority (LNI form), the information necessary to notify the chief executive officer (or equivalent) of each locality where the proposed development will be located. Upon receipt of this submission, the authority will contact such officers and provide the locality a reasonable opportunity to comment on the proposed development.

B. Any principal intending to submit LNI forms for more than five proposed developments must first schedule a meeting with authority staff. The authority may, in its sole discretion, require any principal to provide evidence of site control, satisfactory to the authority, before sending the notification described in subsection A for any respective proposed development.

C. Applicants will receive negative points toward their applications for:

1. Failure to submit the form and any required attachments by the prescribed deadline. (minus 50 points)

2. Receipt by the authority of a response from the chief executive officer of the locality where the proposed development is to be located opposing the allocation of credits for the development. Any such letter of opposition must (i) certify that the proposed development is inconsistent with current zoning or other applicable land use regulations and (ii) be accompanied by a legal opinion from the locality's attorney confirming that the jurisdiction's opposition does not have a discriminatory intent or a discriminatory effect that is unsupported by a legally sufficient justification in violation of the Fair Housing Act (Title VIII of the Civil Rights Act of 1968, as amended). (Minus 25 points)

13VAC10-181-40. Actions to protect long-term affordability.

To promote long-term affordability at tax credit developments, the authority may, in its discretion, take any of the actions listed in this section as the authority reasonably determines necessary or appropriate to achieve the goals of the QAP.

1. Debar principals who have made misrepresentations to the authority or who have demonstrated a history of conduct detrimental to long-term compliance with extended use agreements, whether in Virginia or another state;

2. Reject any application submitted by an applicant containing a debarred principal or a principal that, on or after January 1, 2019, either (i) requested a qualified contract in the Commonwealth, regardless of whether the extended use agreement was terminated through such process, or (ii) participated, in the authority's determination, in a foreclosure or instrument in lieu of foreclosure arranged for the primary purpose of terminating an extended use agreement issued by the authority;

3. Reject any application from an applicant with a principal the authority determines (i) is a principal in a project currently in substantial noncompliance with the requirements of the IRC or (ii) had an ownership or participation interest in a development at the time the authority reported such development to the IRS as failing to comply with the requirements of the federal low-income housing tax credit program;

4. Reject any application from an applicant whose principals the authority has determined lack the experience, financial capacity, or predisposition to regulatory compliance necessary to carry out the responsibilities for the acquisition, construction, ownership, operation, marketing, maintenance, or management of the proposed development or the ability to fully perform all the duties and obligations relating to the proposed development.

5. Require any applicant to enter into a right of first refusal on a form designated by the authority;

6. Require applicants to include within their organizational documents provisions limiting transfers of partnership or member interests or other actions the authority deems detrimental to the continued provision of affordable housing; and

7. Include in its extended use agreements and guidance documentation any requirements the authority considers necessary or appropriate to carry out or enforce the IRC, this chapter, and any future changes to them, as well as all current and future federal or state laws, administrative guidance, and judicial decrees.

13VAC10-181-50. Mandatory application requirements.

A. Applications for reservation of credits shall be submitted on forms and in the manner prescribed by the authority and must include all documentation, certifications, and information required by guidance documentation and this chapter, satisfactory to the authority. The authority may modify the application, other guidance documentation, and requirements at any time to ensure compliance with the IRC and this chapter and to facilitate reservations and allocations consistent with the QAP.

The authority shall prescribe submission deadlines as necessary to promote administrative efficiency and incentivize deal readiness. The authority may reject any application it deems, in its sole discretion, materially incomplete or submitted in bad faith.

After the application deadline, unless solicited by the authority pursuant to this chapter, no oral, written, or electronic communications made on behalf of a tax credit applicant or in support of or in opposition to any application will be accepted or considered prior to the announcement of final reservation awards.

B. The application shall require, at a minimum and as applicable, the following information and written documentation:

1. A market study prepared by a housing market analyst meeting the authority's qualification requirements, demonstrating adequate demand for the proposed development;

2. A breakdown of sources and uses with sufficient detail to identify project costs and the complete financing structure, including subsidies and anticipated syndication or placement proceeds;

3. Pro forma financial statements setting forth the anticipated cash flows during the credit period as defined in the IRC;

4. For rehabilitation projects, evidence that construction costs for existing units exceed $15,000 per unit or $10,000 per unit for developments financed with tax-exempt bonds;

5. Legal opinion regarding compliance of the proposed development with the IRC along with any additional assurances the authority may require;

6. Plans and specifications;

7. Evidence of site control;

8. Evidence of proper zoning or that no zoning or special use permit is required;

9. Certification by the applicant as to the full extent of all federal, state, and local subsidies that apply or that the applicant expects to apply with respect to each building or development;

10. Certifications, in forms required by the authority, and other such information specified and deemed necessary by the authority to evidence previous participation;

11. Certification, in a form required by the authority, that the design of the proposed development meets all of the authority's amenity and design requirements applicable to the type of housing to be provided by the proposed development; and

12. Such additional information as the authority may require as necessary to fully evaluate the application for compliance with the QAP and § 42 of the IRC, including a physical needs assessment and environmental site assessment, as permitted by the IRC and this chapter.

C. Acceptable evidence of site control is limited to the following, which must prohibit the owner from continuing to market the property:

1. Sole fee simple ownership of the site by the applicant;

2. A lease of the site to the applicant for a term extending beyond the total period of affordability represented in the application; or

3. A valid and binding written option or contract, extending at least four months beyond the applicable application deadline, to acquire or lease the site, provided that such option or contract contains no conditions within the discretion or control of the fee simple owner.

A contract for the acquisition of a site with existing residential property may not require vacancy of any buildings as a condition of such contract, unless relocation assistance is provided to displaced households, if any, at a level required by the authority.

In the case of acquisition and rehabilitation of developments funded by Rural Development of the U.S. Department of Agriculture (Rural Development), any site control document subject to approval of the partners of the seller does not need to be approved by all partners of the seller if the general partner of the seller executing the site control document provides (i) an attorney's opinion that such general partner has the authority to enter into the site control document and such document is binding on the seller or (ii) a letter from the existing syndicator indicating a willingness to secure the necessary partner approvals upon the reservation of credits.

D. The authority shall establish maximum development cost limits at least annually. Cost limits may vary by geographic area, development type, or other factors identified by the authority in its guidance documentation. The authority may reject any application that exceeds applicable cost limits. After project completion but prior to issuing IRS Form 8609, the authority shall evaluate compliance with the applicable cost limit, which shall be the higher of (i) the cost limit in effect at the time the application was submitted or (ii) the cost limit in effect when the authority issues IRS Form 8609.

E. The authority shall include any maximum developer fee calculations within its guidance documentation, but no developer fee may exceed 15% of the development's total development cost, as determined by the authority.

F. The authority shall reject any application for a development seeking an additional credit reservation. Any applicant seeking such an increase must instead cancel the existing reservation and submit a new application for the total combined credit amount.

G. Each applicant shall commit in the application to the following requirements:

1. Resident protections.

a. Provide relocation assistance to displaced households, if any, at such level required by the authority.

b. Not impose an annual minimum income requirement upon tenants that exceeds the greater of $3,600 or 2.5 times the portion of rent that tenants receiving rental assistance must pay directly.

c. Provide tenants a written acknowledgement form approved by the authority, disclosing (i) the availability of renter education from the authority, (ii) that tenants may only be evicted for good cause, and (iii) any additional disclosures designated by the authority.

2. Operational requirements.

a. Utilize a property management company certified by the authority to manage the proposed development.

b. If the proposed development contains a community room, provide free Wi-Fi access in the community room, restricted to resident-only usage.

3. Elect the average income test as the applicable minimum set-aside on IRS Form 8609.

4. Agree within the extended use agreement to waive the applicant's right to request a qualified contract as described in the IRC.

5. Unless prohibited by an applicable federal subsidy program, maintain a leasing preference in conformance with the authority's guidance documentation to individuals (i) in one or more target populations identified within the guidance documentation, (ii) having a voucher or other binding commitment for rental assistance from the Commonwealth, and (iii) referred to the development by a referring agent approved by the authority.

13VAC10-181-60. Scoring criteria.

A. The authority shall review each application, and, based on the application and other information available to the authority, shall assign points to each application as outlined within this section and the authority's guidance documentation. Any development earning fewer than 200 total points on its application (100 total points for developments financed with tax-exempt bonds) shall be ineligible for any reservation or allocation of credits.

B. Readiness. Written evidence satisfactory to the authority of unconditional approval by local authorities of the plan of development or site plan for the proposed development or that such approval is not required. (10 points)

C. Housing needs characteristics.

1. Certification, on a form and in a manner prescribed by the authority, that the proposed development is located within an area recognized as contributing to community revitalization, including areas such as qualified census tracts, federal targeted areas, opportunity zones, tribally owned lands, and certain other areas formally designated by federal, state, or local law for redevelopment, revitalization, conservation, or rehabilitation, as identified and defined by the authority within the form. (15 points)

2. Commitment to give leasing preference to individuals and families on public housing waiting lists maintained by the local housing authority or nearest section 8 administrator operating in the locality where the proposed development will be located; and to promptly notify such housing authority or administrator when units become available for lease. Developments receiving project-based rental assistance for all residential units are ineligible for points under this subdivision. (Up to 5 points)

3. Any (i) funding source, as evidenced by a binding commitment or letter of intent, that is used to reduce the credit request; (ii) commitment to donate land or buildings or tap fee waivers from the local government; or (iii) commitment to donate land, including a below market-rate land lease, from an entity that is not a principal in the applicant (the donor being the grantee of a right of first refusal or purchase option with no ownership interest in the applicant shall not make the donor a principal in the applicant). Loans must bear interest at a rate below the applicable federal rate (AFR), as published by the IRS pursuant to § 1274(d) of the IRC at the time of commitment, or be cash-flow only to be eligible for points under this subdivision. Financing from the authority or an entity in which any principal of the applicant has an ownership interest, and market rate permanent financing sources are ineligible to qualify for points under this subdivision. (2 points for each percentage point that the value of subsidized funding sources, as determined by the authority, represent of the total development cost of the proposed development; maximum 60 points). The authority will confirm receipt of such subsidized funding prior to the issuance of IRS Form 8609.

4. Receipt of new project-based subsidy. (1 point per project-based voucher, 8 points maximum; however, points apply only when competing in select pools as indicated within the guidance documentation). Any points awarded under this subdivision will reduce, in equal measure, the maximum 60 points awarded within subdivision C 3 of this section.

5. Any development that has received a commitment from a local governmental entity to reduce, rebate, or otherwise offset real estate taxes owed on the increase in assessed value of the development pursuant to a negotiated agreement or program, excluding any reduction in assessed value obtained pursuant to § 58.1-3295 of the Code of Virginia. (5 points)

6. Any development subject to (i) the U.S. Department of Housing and Urban Development's section 8 or section 236 program or (ii) Rural Development's 515 program at the time of application (20 points), unless the applicant is or has any common interests with the current owner, directly or indirectly. The application will only qualify for these points if the applicant waives all rights to developer's fee on acquisition and any other fees associated with the acquisition of the development, unless permitted by the authority for good cause.

7. Any proposed elderly or family development located in a census tract with a census-measured poverty rate between 0.0% and 25% (up to 20 points on a sliding scale for lower poverty rate).

8. Any proposed development identified by Rural Development as high priority for rehabilitation at the time the application is submitted to the authority. (15 points)

D. Physical development characteristics.

1. If development contains a community or meeting room with a minimum of 749 square feet, which may not be used for commercial purposes. (5 points). The owner may use the community room to conduct, or contract with a nonprofit provider to conduct, programs or classes for tenants and members of the community in compliance with use guidelines prescribed by the authority, but only if the cost of the community room is not included in eligible basis. Failure to comply with such requirements will result in a 10-point penalty on future applications submitted by principals in the owner within three years after the year in which the noncompliance occurs.

2. If at least 25% of exterior façade consists of full-depth, vented brick masonry units. (10 points)

3. If 100% of exterior façade consists of durable, low-maintenance material. (10 points)

4. If each bathroom contains only WaterSense-labeled toilets, faucets, and showerheads. (3 points; however, applicants receiving points for committing to obtain a green certification pursuant to subsection E of this section are ineligible for these points)

5. If all cooking surfaces are equipped with fire suppression features that meet the authority's requirements as indicated within the guidance documentation. (2 points)

6. If each full bathroom's bath fans are wired to the primary bathroom light with a delayed timer or are equipped with a humidistat. (3 points)

7. If dehumidification systems are permanently installed in each unit (5 points); or, for rehabilitations and adaptive reuse, if each unit is equipped with dedicated space, drain, and electrical hook-ups for permanently installed dehumidification systems. (2 points)

8. If each interior door is solid core. (3 points)

9. If construction or rehabilitation of the development includes installation of a renewable energy electric system in accordance with the manufacturer's specifications and all applicable provisions of the National Electrical Code. Qualifying installations must have either been performed by a licensed electrician or have passed a final inspection performed by a licensed electrician. (5 points)

10. If each unit (within a rehabilitation project only) is provided with the necessary infrastructure for high-speed Internet or broadband service where such infrastructure did not previously exist. (5 points)

11. The following points are available to applications electing to serve elderly tenants:

a. If all cooking ranges have front controls. (1 point)

b. If all bathrooms have an independent or supplemental heat source. (1 point)

c. If all entrance doors to each unit have two eye viewers, one at 42 inches and the other at standard height. (1 point)

E. Location and design.

1. If the structure is historic, by virtue of being listed individually in the National Register of Historic Places, or due to its location in a registered historic district and certified by the Secretary of the Interior as being of historical significance to the district, and the rehabilitation will be completed in such a manner as to be eligible for historic rehabilitation tax credits. (5 points)

2. If units and common areas within the development (i) meet the authority's accessibility standards and (ii) and are actively marketed to persons with disabilities, each as outlined within the guidance documentation. (5 points for 5.0% of total units, or 10 points for 10% of total units; 5 additional points if all accessible units include at least one roll-in or step in shower)

3. Any development located within one-half mile of an existing commuter rail, light rail, or subway station or one-quarter mile of one or more public bus stops either existing or to be built in accordance with existing proffers. (10 points, unless the development is located within the geographical area established by the authority for a pool of credits for Northern Virginia or Tidewater Metropolitan Statistical Area (MSA), in which case, the development will receive 20 points if the development is ranked against other developments in such Northern Virginia or Tidewater MSA pool, 10 points if the development is ranked against other developments in any other pool of credits established by the authority)

4. Any development whose application includes (i) a commitment to obtain, prior to the issuance of IRS Form 8609, a green building certification approved by the authority and (ii) a certification from the development's architect that the design incorporates the elements necessary to achieve such certification, each as approved by the authority. (10 points; additionally, such development shall be treated as if located in a difficult development area, provided that any resulting increase in the development's eligible basis shall not exceed 10% of the development's total eligible basis.

5. Any applicant containing a principal eligible to apply points previously awarded by the authority for participation in a development meeting Zero Energy Ready Home Requirements or Passive House Institute standards. (10 points until December 31, 2028)

6. If units are constructed to include the authority's universal design features, provided that the proposed development's architect is on the authority's list of universal design certified architects. (15 points if all the units in an elderly development meet this requirement; 15 points multiplied by the percentage of units meeting this requirement for nonelderly developments)

F. Tenant population characteristics.

1. Applicants may earn up to 30 points on a sliding scale for committing to either:

a. Maintain a leasing preference for individuals and families with children, while ensuring that at least 20% of total units within the development contain at least three bedrooms; or

b. Provide age-restricted housing and maintain at least 20% of total units within the development as one-bedroom units.

2. Applicants will be awarded 10 points for committing to build and operate the development in accordance with certain development criteria established by the Virginia Department of Behavioral Health and Developmental Services, as specified within the guidance documentation.

G. Substantial affordability covenants. Applicants may earn points for committing to any of the following:

1. Impose income or rent limits on the low-income housing units throughout the compliance period (as defined in the IRC) below those required by the IRC in order for the development to be a qualified low-income development, as such limits and associated point values are outlined within the guidance documentation. (Up to 50 points for income and rent limits; up to 25 points for rent limits only)

2. Extend the extended use period. (15 points for 10 additional years or 30 points for 20 additional years)

3. Participation by a local housing authority or qualified nonprofit and a commitment by the applicant to sell the proposed development to the local housing authority or qualified nonprofit pursuant to the authority's form right of first refusal. (30 points; plus 5 points if the local housing authority or qualified nonprofit organization submits a homeownership plan satisfactory to the authority in which the local housing authority or qualified nonprofit organization commits to provide tenants the option to purchase a unit in the development)

4. Participate in the Rental Assistance Demonstration (RAD) program or other public housing conversion program involving federal project based rental assistance, competing in the local housing authority pool. (10 points)

H. Electronic payment. Any applicant that commits in the application to submit any payments due the authority, including reservation fees and monitoring fees, by electronic payment. (5 points)

I. Efficient use of resources. The authority shall determine the maximum amount of credits allowable to each development under § 42 of the IRC. Points shall be awarded to any development for which the applicant's credit request is less than the maximum allowable amount, with a greater number of points awarded for a proportionally lower credit request. (Up to 50 points)

J. Negative Points. An applicant may receive negative points toward its application for sponsor participation, as follows:

1. If the applicant has a principal that, within the past three years, is or was a principal in a development:

a. At the time the authority determined that the owner failed to correct a life-threatening hazard in the timeframe established by the authority. (minus 50 points)

b. That either (i) at the time the authority reported such development to the IRS for noncompliance, had not corrected such noncompliance or (ii) remained out-of-compliance with the terms of its extended use agreement after notice and expiration of any cure period set by the authority. (Minus 15 points)

c. That did not build a development as represented in the application for credit. (Minus two times the number of points assigned to the items not built or minus 50 points per requirement for failing to provide a minimum building requirement, in addition to any other penalties the authority may elect to seek under its agreements with the applicant)

d. That has had a reservation of credits terminated by the authority. (Minus 10 points)

e. That includes a management company in its application that is rated unsatisfactory by the authority. (Minus 25 points)

f. For which the actual cost of construction exceeded the applicable cost limit by 5.0% or more. (Minus 50 points)

2. If it has a principal that, within the past two years, is or was a principal in a development that was issued IRS Form 8609 after making more than two requests for final inspection. (Minus 5 points)

13VAC10-181-70. Application pools and scoring.

A. Application rounds. The authority may establish one or more rounds of application review, ranking, and credit reservation within each calendar year. The authority shall designate within its guidance documentation the number of rounds to be offered and the procedures governing each round.

B. General authority. The authority shall establish and structure application pools as it deems necessary to best meet the affordable housing needs of the Commonwealth and shall assign credits to each pool in such amounts as it determines appropriate. The authority shall set forth the pool structure, including the pools to be offered, eligibility criteria for each pool, and the amount of credits available within each pool, within its guidance documentation, which shall be reviewed and updated at least annually and may be updated at any time as the authority determines necessary.

C. Required pools. The authority shall maintain at least the following pools:

1. Nonprofit pool. The authority shall maintain a nonprofit pool sufficient to meet the requirements of § 42(h)(5) of the IRC. Eligibility shall be limited to applicants whose general partnership interests are wholly owned by one or more qualified nonprofits authorized to do business in Virginia that demonstrates a history of being substantially based or active in the community of the development and a commitment to materially participate in the development and operation of the development throughout the compliance period. Credit requests within the nonprofit pool may not exceed $950,000. The authority shall establish additional eligibility criteria for the nonprofit pool within its guidance documentation.

2. Accessible and Supportive Housing ("ASH") pool. The authority shall maintain an ASH pool for nonelderly developments actively marketed to people with disabilities. The authority shall establish eligibility criteria for the ASH pool within its guidance documentation as it deems necessary to best meet the accessible and supportive housing needs of the Commonwealth, including without limitation, rental assistance requirements, accessibility standards, unit marketing requirements, services commitments, and principal qualification standards.

3. Preservation pool. The authority shall maintain a preservation pool for existing low-income housing tax credit developments seeking credit resyndication. The authority shall establish eligibility criteria for the preservation pool within its guidance documentation as it deems necessary to best meet the affordable housing preservation needs of the Commonwealth, including without limitation, years of compliance under the existing extended use agreement, investor divestment requirements, and rent increase limits.

D. Financial infeasibility. The authority shall deem any development seeking more credits than are available within a credit pool in which the development competes as financially infeasible and ineligible for any reservation or allocation of credits from any pool.

E. Reassignment of developments between pools. The authority may reassign any development from one pool to another as it determines necessary or appropriate to achieve the affordable housing needs of the Commonwealth or to make the most effective use of available credits.

F. Ranking of applications. Upon assignment of points to all applications within a pool, the authority shall rank applications in descending order of points assigned. Applications assigned more points shall be ranked higher than applications assigned fewer points.

G. Set-aside adjustments to ranking. If any set-asides established by the authority cannot be satisfied after ranking applications based on points assigned, the authority may rank as many applications as necessary to meet the requirements of such set-aside, selecting the highest-ranked application or applications meeting the requirements of the set-aside, over applications with more points.

H. Tie-breaking. In the event that two or more applications within a pool receive an equal number of points and the credits available within such pool are insufficient to fund all tied applications, the authority may establish criteria, at its discretion, to determine how available credits shall be allocated among such applications.

I. Forward allocation of credits. The authority may reserve credits from the Commonwealth's annual credit ceiling for the following calendar year. Any such reservation exceeding 50% of the Commonwealth's annual credit ceiling for the following year must be authorized by the authority's board of commissioners.

J. Credit cap to related applicants.

1. The total amount of credits that may be awarded in any credit year to any applicant or to any related applicants for one or more developments shall not exceed 15% of Virginia's per capita dollar amount of credits for such credit year (credit cap) without approval from the authority's board of commissioners. The authority shall outline within its guidance documentation the criteria used to determine related party affiliations, which shall exclude limited partners or other similar investors.

2. If credits awarded to an applicant or related applicants in any credit year would collectively exceed the credit cap, the authority shall notify the applicants of the conflict and specify a date by which the applicants must designate which applications shall not proceed. If the applicants fail to make such designation by the specified date, the authority shall make that determination in the best interest of the program and notify the applicants prior to the date the authority's board of commissioners vote to finalize application rankings.

K. Independent analysis by the authority. During its review of submitted applications, the authority may conduct:

1. Its own analysis of the demand for the housing units to be produced by each applicant's proposed development. Notwithstanding any conclusion in the market study submitted with an application, if the authority determines that, based upon information from its own loan portfolio or its own market study, inadequate demand exists for the housing units to be produced by an applicant's proposed development, the authority may exclude and disregard the application for such proposed development.

2. A site visit to the applicant's proposed development. Notwithstanding any conclusion in any environmental site assessment submitted with an application, if the authority determines that the applicant's proposed development presents health or safety concerns for potential tenants of the development, the authority may exclude and disregard the application for such proposed development.

L. The authority may, in its discretion, grant an applicant the opportunity to correct minor and immaterial defects affecting mandatory items (but not points items) identified in an application by providing the applicant written notice that the applicant has two business days from the date of the notification to cure identified defects or to provide requested information. Such written notice does not constitute the authority's approval of the application or confirm that the application is free of defects (identified or unidentified within the notice) that could result in rejection of the application or the assessment of a penalty. If an applicant fails to respond or to adequately address the question asked, a negative conclusion shall be drawn.

13VAC10-181-80. Reservation, allocation, and issuance of IRS Form 8609.

A. Credit reservation.

1. The authority shall provide each applicant reasonable notice of the authority's reservation decision. Upon selecting an applicant for reservation, the authority shall issue a written binding commitment to allocate reserved credits and may also require the applicant to pay fees, submit a good faith deposit, execute contractual agreements providing for monetary or other remedies, or any combination of these requirements to ensure compliance with all applicable requirements, including conformance with all representations, commitments, and information contained in the application. The written binding commitment shall contain such provisions as the authority deems prudent or necessary to carry out the requirements of the IRC and this chapter, including provisions (i) prohibiting any direct or indirect transfer of partnership interests except for the admission of limited partners prior to the placed-in-service date; and (ii) limiting developer fees to the amounts established during application review. Any such provisions may be modified only by the authority's express written consent.

2. The authority may establish deadlines for determining an applicant's ability to qualify for an allocation of credits, in order to allow sufficient time to reserve or reallocate credits to other eligible applicants in the event of a reduction or termination of a reservation.

3. Any material changes to the development as proposed in the application shall require the prior written approval of the authority. As a condition of such approval, the authority may reduce the amount of credits reserved, impose additional terms and conditions, impose penalties, debar the applicant and its principals, or take any combination of these actions as it deems necessary or prudent to comply with the IRC, this chapter, and any contractual agreement between the authority and the applicant.

B. Credit allocation. In addition to all other applicable requirements in this QAP, the authority may establish within its guidance documentation such application procedures, deadlines, documentation requirements, and other requirements as it deems necessary or prudent to administer the allocation of credits to developments not financed with tax-exempt bonds, including certifications or documentation necessary or prudent to confirm that such developments will satisfy all applicable requirements of § 42 of the IRC.

C. Issuance of IRS Form 8609.

1. When a building or development that has received a credit reservation is placed in service or otherwise satisfies § 42(h)(1)(E) of the IRC and meets all pre-allocation requirements, the applicant shall notify the authority and request a credit allocation. The request must include, in form and substance satisfactory to the authority, CPA certifications of actual costs, a sources and uses breakdown, pro forma cash flow statements, evidence of all federal, state, and local subsidies applied or expected to apply to the project, and any other documentation the authority determines necessary to evaluate the development's financial feasibility and long-term viability as a qualified low-income housing development or to verify that the applicant has met the commitments made in its credit application.

2. The authority shall determine the amount of credits necessary for the project's financial feasibility and long-term viability in accordance with § 42 of the IRC and criteria and assumptions the authority may establish within its guidance documentation. The authority shall review all development costs for reasonableness and may reduce any costs determined to be unreasonably high. Unless a project is financed using tax-exempt bonds, credits allocated may not exceed the authority's determination by more than $100.

3. The authority reserves the right to inspect any development prior to issuing IRS Form 8609 to verify that the development conforms to the representations made in the application.

4. Prior to issuance of IRS Form 8609, the applicant shall execute and submit any forms required to authorize the IRS to release relevant tax information to the authority.

5. Prior to issuance of IRS Form 8609, the applicant shall execute and record the extended use agreement prepared by the authority containing terms required by the IRC and such additional terms as the authority deems necessary to ensure compliance with this chapter. The extended use agreement shall run with the land as a restrictive covenant binding on the applicant and all successors in interest, regardless of whether such successor directly received an allocation of credits and shall be enforceable by the beneficial parties referenced in the agreement in any court of competent jurisdiction.

D. Monitoring, enforcement, and recapture and substitution of credits.

1. The authority may require applicants to submit, at such times and in such form as the authority may require, written confirmation and documentation of the development's status and its compliance with the requirements of the IRC and any commitments made pursuant to this chapter.

2. The authority may, at any stage prior to or following allocation, exercise any one or more of the following remedies in any combination if it determines that (i) any or all buildings in the development will not become qualified low-income buildings within the time required by § 42 of the IRC or will not otherwise qualify for credits, (ii) material changes have been made to the development without the authority's written approval, or (iii) the applicant has breached any contractual agreement with the authority:

a. Terminate or reduce the reservation or allocation of credits;

b. Charge fees or draw on any good faith deposit;

c. Impose additional terms and conditions with respect to the credits;

d. Debar or penalize the applicant and its principals; or

e. Seek to enforce any remedies available to the authority under applicable law, this chapter, or the IRC.

3. An allocation may be canceled by mutual consent and the authority may re-reserve or reallocate any terminated or canceled credits in any manner permitted by the IRC.

4. The authority may permit, in its discretion, an applicant to return a prior-year credit reservation and receive an equal allocation of current or future year credits, provided the authority determines the applicant can place the development in service within the time required by the IRC. The authority shall establish applicable procedures and deadlines for such requests within its guidance documentation.

13VAC10-181-90. Compliance monitoring.

A. The owner of any development encumbered by an extended use agreement, regardless of whether such owner directly received an allocation of credits, is responsible for compliance with the requirements of § 42 of the IRC and this chapter. The authority shall establish additional requirements as it deems necessary or prudent to ensure owner compliance with § 42 of the IRC and this chapter, and may modify such requirements at any time as it deems necessary or prudent, and shall notify the IRS of any noncompliance of which it becomes aware; however, the authority shall not be liable for an owner's noncompliance, nor does the authority's failure to discover noncompliance excuse or constitute a waiver of an owner's compliance obligations.

B. The authority shall establish within its guidance documentation, and update as it deems appropriate, the specific recordkeeping, certification, and inspection requirements applicable to owners of low-income housing developments, consistent with the requirements of the IRC and this chapter. Such requirements shall account for any difference between obligations applicable in the first year of the compliance period and those applicable in subsequent years and shall at a minimum address:

1. The records owners must maintain for each qualified low-income building until the close of the extended use period, including records relating to unit counts and sizes, rent levels, income certifications, and supporting documentation, unit vacancies, eligible basis and qualified basis, and general public use requirements;

2. The annual certifications owners must provide to the authority under penalty of perjury, including certifications relating to applicable minimum set-aside compliance, rent restrictions, tenant income certifications, unit availability, fair housing compliance, habitability, eligible basis, and the status of the extended use agreement; and

3. Retention of records described in this subsection for such periods as required by the IRC and applicable law.

C. The authority shall conduct on-site inspections and low-income certification reviews, including reviews of supporting documentation and rent records, in accordance with the requirements of the IRC. The authority shall determine which developments are subject to inspection or review in any given year and which records are examined; however, until the close of the extended use period, all developments remain subject to inspection or review at any time.

D. The authority shall provide written notice to the owner of any noncompliance or failure to certify compliance with the IRC and this chapter, specifying a correction period which the authority may extend for good cause. The authority shall report noncompliance to the IRS as necessary and appropriate to comply with the requirements of § 42 of the IRC and shall retain records of noncompliance as it determines prudent or necessary to comply with applicable laws.

E. To the extent permitted by the IRC, the authority may enter into agreements with federal agencies or applicable tax-exempt bond issuers to accept compliance information from such entities in lieu of collecting and reviewing such information directly from owners.

F. Owners shall pay such fees as the authority requires to administer compliance monitoring until the close of the extended use period.

G. Owners shall, until the close of the extended use period, execute and submit any forms the authority determines necessary to authorize the IRS to release relevant tax information to the authority.

13VAC10-181-100. Tax-exempt bonds.

In addition to all other applicable requirements in this QAP, the authority may establish within its guidance documentation such application procedures, deadlines, documentation requirements, and other requirements as it deems necessary or prudent to administer the allocation of credits to developments financed with tax-exempt bonds, including certifications or documentation necessary or prudent to confirm that such developments will satisfy all applicable requirements of § 42 of the IRC.

13VAC10-181-110. Qualified contracts.

A. Any owner seeking a qualified contract shall first contact the authority to initiate a preliminary eligibility determination and shall provide the authority with any documents and information that the authority may request to evaluate the owner's eligibility.

B. If the authority determines that the right to a qualified contract was not waived within the extended use agreement or otherwise extinguished and that owner is eligible to seek a qualified contract, the owner shall submit to the authority a complete qualified contract application on forms prescribed by the authority. The authority shall establish within its guidance documentation the information and documentation required for a complete qualified contract application, including criteria and assumptions to be used in determining the qualified contract price in accordance with § 42(h)(6)(F) of the IRC, and shall also establish the process and deadlines applicable to each stage of the qualified contract application process.

At a minimum, a complete qualified contract application shall include, in form and substance satisfactory to the authority:

1. The IRS Form 8609 for each building;

2. The owner's annual tax returns for all years of operation since the start of the credit period ("all years");

3. Annual project financial statements for all years;

4. Loan documents for all secured debt during the credit period;

5. The owner's organizational documents (original, current, and all interim amendments); and

6. Accountant work papers for all years.

C. The authority may additionally require the following in form and substance satisfactory to the authority, either at the time of the submission of the qualified contract application or after confirmation of the qualified contract price, as it determines in its discretion:

1. A physical needs assessment;

2. An appraisal for the entire project;

3. A market study for the entire project;

4. A title report showing marketable title;

5. A Phase I environmental assessment;

6. A legal opinion or other assurances as to, among other things, compliance with the IRC and this chapter; and

7. A certification, together with an opinion of an independent certified public accountant or other assurances setting forth the calculation of the qualified contract amount requested in the application and certifying, among other things, that the owner is entitled to the qualified contract amount requested.

D. The authority shall charge fees, due and payable at such time as the authority shall require, that it determines necessary to cover third-party costs and the authority's actual costs incurred in producing a qualified contract. The fees shall not include any general costs associated with the general operations of the authority.